US welcome carpet rolled out for HK, mainland firms, ConGen says

The United States welcomes Hong Kong and mainland Chinese enterprises to invest in the world’s largest economy, which enjoys relatively low asset prices and declining energy cost, the US Consul General to Hong Kong and Macau said.

“There has been a shaking out for the US economy since 2008, our asset prices are extremely competitive,” Clifford Hart told a Hong Kong media briefing on Wednesday. “On top of that, we have an energy revolution so there is a declining energy cost.”

Also, the US government is encouraging foreign companies to come to the US and facilitating their entry, Hart said. “These are the dominant factors that will continue to drive foreign investment [to the US] in the future.”

“Over the last five years, China has been the fastest single growing source of foreign investment to the US.

“Apparently, a lot of Chinese companies there are doing pretty good, regardless of whatever comments you may be hearing,” he said, replying to a reporter’s question about the difficulties faced by some Chinese investors in acquiring US assets because of national security considerations.

In March 2008, a proposed deal that would allow the Chinese telecommunication equipment company Huawei Technologies Co. Ltd. to own a 16.5 percent stake in US rival 3Com collapsed.

Bain Capital, which partnered with Huawei to buy the US technology firm for US$2.2 billion, said it backed out of the deal after it became clear that it would be rejected by the Committee on Foreign Investment in the United States (CFIUS), a panel that has the power to block foreign takeovers on security grounds.

In January 2005, some US lawmakers raised concern over Lenovo Group Ltd.’s (00992.HK) acquisition of IBM’s personal computer business, saying the deal could pose a threat to US national security. In July 30 last year, a similar refrain was heard from American congressmen, who sought to block China’s state-owned oil giant CNOOC Ltd. (00883.HK) from buying Canadian oil firm Nexen, which owns some assets in the US. The two deals eventually got approved.

“People should focus on the outcome, rather than all these sorts of questions, which may or may not have direct relevance to what is going on there,” Hart said.

The overwhelming trend is that Hong Kong and mainland Chinese investments are doing fine in the US, he said.

In the first half of this year, foreign direct investment (FDI) in the US from China amounted to US$11.4 billion, thanks to the US$7.1 billion acquisition of US Smithfield Foods Inc. by Shuanghui International Holdings Ltd. (000858.CN), China’s largest meat processing firm. That compares with last year’s FDI of US$6.2 billion.

The CFIUS is fair to incoming acquisition proposals, and its decisions should not be seen as directed against Chinese firms, Zheng Lili {鄭莉莉}, co-leader of Deloitte Asia Pacific International Core of Excellence, said in the same media briefing.

“If someone wants to argue, Shuanghui’s deal may also face problems as the US army consumes Smithfield’s pork,” Zheng said.

Almost all these concerns can be resolved by exerting more public relations efforts, she said. Buyers should hire good public relations and consultancy firms before filing an application to acquire assets in other countries.

Investment summit

From Oct. 31 to Nov. 1, Hart led a delegation of about 20 Hong Kong corporate executives to SelectUSA 2013 Investment Summit, which was held in Washington, D.C.

He said in a pre-departure reception on Oct. 23 that the United States welcomes further investment from Hong Kong, which has been the source of close to 100 investment deals over the past 10 years. Hong Kong is also a gateway for Chinese outbound investment, Hart said.

Deloitte’s Zheng said about 60 percent of mainland Chinese enterprises that purchased US assets used Hong Kong as a channel, showing the territory’s important role in helping mainland firms go overseas.

There will be an increasing number of M&A deals between China and the US and the size is growing, Zheng said. In the past, the average Chinese acquisition in the US was about US$100 million, but now the size has increased to the range of US$150 million to US$300 million, she said.

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